It is a well-known fact that in times of difficult market conditions companies look to save money by cutting their marketing spend. But is this the right route to take or is it a false economy?

The current problems that are affecting the developed world are seen by many as possibly the worst conditions since the Great Depression of the 1930s.

Struggling firms - hampered by a lack of consumer confidence, rising inflation and problems obtaining credit from beleaguered banks - want to cut costs. The marketing budget is often the first port of call.

But Graeme Atha, director of the Marketing Society and chairman of marketing communications agency Frame, does not necessarily believe this is the right move. "The conventional, established practice is that the marketing budget is the first thing that tends to get cut, despite that being counter-intuitive," he argues.

He says the pure definition of marketing is that it's a general business philosophy - it's not just about advertising and promotional budgets. "it's about the analysis of a market and the application and development of a product in line with that market," he adds.

"In times of economic uncertainty or downturn, marketing has to be at its most focused and sharpest.

That might mean you have to amend your products, your pricing strategy, your distribution strategy and it may be that you reduce the promotional aspect of your marketing plan."

Managing partner of Rapp, Edinburgh, Rebecca Heaney, says that, in her experience, the businesses that are clever enough to realise the downturn is always cyclical, know there is always a way out of it in the longer run. "No doubt people have to tighten the reins - there are lots of different ways to do that - but there is always a level of brand awareness that needs to bemaintained.

They have to bring the business in so how else are you going to do that?" she queries.

"By advertising, by communicating with your customers, by making sure your brand is still out there. it really is a question of balance."

Peter Provan, senior lecturer in professional studies at Central College, Glasgow, agrees that companies cut marketing budgets without thinking of the consequences.

"The problem is a lot of companies, when they get into that situation, think bottom line immediately rather than long-term future," he says.

So if cutting the marketing budget is not the answer, what should businesses do in such difficult times?

Heaney believes companies should make sure they are getting a good return on the spend they do make.

"If you are using your marketing intelligence cleverly and tracking your campaign activity, you should have an idea of how effective that spend has been," she explains.

"Companies that don't, who have perhaps been more tactical, will be the ones that find it very hard to understand where they are going to cut their budgets, and how they are going to cut them, to minimise the impact."

Atha believes it's about company owners recognising the short, medium and long-termaspects of planning and budget management. Every company has to understand what those requirements are.

"Businesses need to take a longer-term view of where they are trying to take their brands and budget accordingly," he notes. "But that's subject to year-by-year fluctuations depending on the economic circumstances.

"I understand changes being made in line with the requirement that the accountant has, but there is far too much short-termism these days with accountants running companies and not seeing the bigger picture."

While many firms will chase new clients in the continuing tricky conditions, Provan warns them not to ignore existing clients who, if treated well, will usually remain loyal. "It is reckoned that it is ten times more expensive to win a new customer than to retain an existing one," he observes. "Yet most companies focus on new customers and tend to neglect their existing customers.

"Increasing customer loyalty is why Tesco has been so successful. It's not because they have done anything different from other high street retailers other than they have focused on their customer. They identified what people are buying in retailing and delivered it."

Once companies have decided on a strategy, the next important step is to look at ways of managing it.

"The seismic changes to the global and local business landscape caused by the credit crunch are putting reputational risk management to the top of the business agenda," says Denise Hannestad, a partner in The Communications Business.

"Now, more than ever, businesses need to keep talking to their clients, partners, employees and key opinion formers. They need to develop robust communications strategies, capable of responding swiftly to market developments and which will enable them to demonstrate real leadership and market insight."

Atha points out that entrepreneurs that are successful instinctively and intuitively understand that marketing is not just about advertising and promotion.

"It's about having a very strong product in line with a market need and delivering that product at the right place, at the right time," he adds. "That was the same 100 years ago and will be the same 100 years from now.

"The word 'marketing' has been translated into advertising, sales and promotion - which is one element of the mix. But people who are good at marketing and understand it realise it's a broader philosophy than that."

So what should companies do to improve the effects of their marketing strategies? In this day and age, many experts believe greater use of the internet is vital.

Provan cites the example of Aspirare Recruitment as a company that identified the internet as key to its continued development. He points out the Hamilton based firm cut its marketing budget by 70 per cent but increased its business by making more effective use of the online opportunities.

"They went down a strategy of not paying the likes of s1jobs and went online themselves," he says. "The reason the company is so successful is that they know how to use the internet.

"If you go into Google and call up job vacancies within their particular areas, they will come up as number one out of the thousands and thousands of hits of potential websites. That's because they understand the internet and know the keywords the search engine will pick up on.

"Most companies don't understand the internet because it is still a relatively dark art."

Top tips for marketing in a downturn

While some businesses clearly see little choice but to slash marketing spending, it is a step that risks a decline in current market share and the loss of future growth opportunities.

But that doesn't mean marketing strategies don't need to be changed to suit the tougher market conditions. Peter Provan, senior lecturer in professional studies at Central College, Glasgow, puts together his five tips for avoiding the pitfalls and getting the biggest bang for the marketing buck in an economic downturn.

1. Know your position in the market

Are you a market leader, are you a follower or are you in a niche position? Most companies don't know who they are competing against. They know their main competitors but they don't know where they are in the pecking order. It's very important they know their position because there's no point in following strategies that are going to get market leadership if they aren't big enough. Equally there is no point, if a company is market leader, in trying to be a niche player.

2. Match resources to the opportunities that exist

Companies should identify the opportunities. If there are five and a company only has resources for two, it should identify which two best suit it to achieve its objectives.

Ford, for example, tried to have a product in every car market segment. It failed because Land Rover and Jaguar were too specialised for the company. It wasn't where it was meant to be so Ford sold them off.

3. Identify your competitive advantage.

The company exists for a reason. It must be good at something and what it must do is identify what it is they are best at or better than the competition at and exploit it.

4. Look for new markets for existing products

Products may have to be modified but the likelihood is there will be applications that the company had never considered for them.

For instance, Goretex was never a jacket although that is what most people think of it as. It was actually a wrapping for a cable.

The company found new markets and ways of exploiting the fabric.

5. Identify and retain your key customers

Companies should satisfy their existing customer base rather than chasing an elusive new customer when everybody else is chasing new customers. It's ten times more expensive and it's uncertain.

If a company has existing customers and maintains a relationship with them, they will stay for life. People don't like moving from a company. The only reason they do so is because they are dissatisfied with the offering they get from a company.